Making contact

Seizing opportunities that arise through change is at the heart of the long and highly successful career of one of New Zealand’s leading governors,
Rob McDonald. Soon to start his second year as Chair of Contact Energy,
one of New Zealand’s largest energy generators and strongest share market
performers, Rob has held a number of senior management roles with a focus on business and strategic planning.

In a finance career spanning over 30 years, Rob McDonald has worked in professional services at Coopers and Lybrand and in executive roles at Air New Zealand, where he was named Deloitte’s Top CFO of the Year in New Zealand in 2015. He also received the Fairfax Media New Zealand CFO of the Year award in 2010.

Most recently Rob has made the move into corporate governance. These days, alongside his role at Contact Energy, he is a director of Sovereign Assurance, Fletcher Building, and Chartered Accountants Australia & New Zealand. Rob’s story has always been one of business, he says.

“I grew up in a family of businesspeople. I was immersed in that world from a young age, so when I left school it was natural for me to take the opportunity do a commerce degree and go into accounting.”

“It was a great experience to work in a company and industry that is so dynamic, and intensely competitive.”

Rob joined James Hardie as a trainee accountant in 1980. He attained a Bachelor of Commerce from Auckland University, and in 1999 completed the Program of Management Development at Harvard Business School. After six years in industry ‘including some offshore travel and working in various companies’, in 1985 Rob joined Coopers and Lybrand, working there for seven years till the early 1990s, when his head was increasingly turned by the idea of re-jumping the fence and working client-side.

“I really liked being accountable and responsible for getting
things done. It is different to the profession, where you write
reports, send off a bill, and hope something will happen with
what you wrote.”

TAKING FLIGHT

The company that he joined was of course Air New Zealand. Having been on a secondment to the airline for over a year while at Coopers, and having got to know many people there, it was a natural – and successful – move across.

“I had a long and enjoyable career there,” he says of the quarter century period in the airline.

“For me, the highlight was being CFO for nearly 14 years: it was a really great experience to work in that role in a company and industry that is so dynamic, and intensely competitive. Everyone has to get out of bed every morning willing to go into battle every day – it is such a stimulating industry to be in.”

It also satisfied a personal passion of Rob’s.

“Ever since I was a child I’ve liked planes, although I don’t fly them. For me, my time at Air New Zealand joined my love of aviation to my passion for the commercial parts of it. It was a dream outcome for me; something that turned into an incredibly satisfying career.”

Rob was involved in the purchasing and leasing of aircraft for over 20 years.

“That involvement taught me the importance of strong processes for evaluation, acquisition and governance. When you buy or lease an asset for 20 years you had better have a long term perspective and put yourself in the shoes of the person who will be dealing with that asset in 20 years’ time.”

GAINING ENERGY

Then, as Rob started to get into what he describes as the latter part of his tenure as CFO, he started thinking about other ways to contribute through directorships. His appointment as a director of Contact Energy in 2015 was
fully supported by the airline, he says.

“I was very grateful that Air New Zealand was willing to support me – and it works both ways. Often executives later in their tenures find that directorships are a great way to get stimulation and bring things from the outside world back into their companies. Now I look back on it though, more importantly it gave me a start that meant I wasn’t a novice director straight out of executive life when I went into it fulltime. It gave me a great head start.”

Having been at Air New Zealand for a long period of time, Rob had also experienced a variety of chairs and directors, which fuelled his own views as to what makes for a good approach to governance roles.

“I was incredibly fortunate as an executive to have some really strong chairs,” he says.

“Certainly, John Palmer, as Chair of Air New Zealand, saw it at its rock bottom and then as it came through over time, leading a very strong board with seasoned executives who had become directors, people who brought a lot of wisdom to the board.

“In the early years there were some really difficult times; the directors brought a lot of energy, diligently working through issues over a long period. There was so much executive experience around the table, which meant that they could bring some really insightful guidance and support to executive management.”

Knowing where the line stopped was also a director strength, says Rob.

“They knew how to have a good fight and then walk away and play tennis afterwards. They had strong opinions that were loosely held and able to be changed by the debate. They saw their job as one of guidance, and in terms of strategy to test, give feedback and then get on and give their executives
support.”

LEARNING LESSONS

At this time, he also learned a critical lesson for any executive looking to transition into a governance role.

“The thing I have learned to be avoided is that you’re not there to do the work of management. If you can’t accept that management are doing their jobs right, then that’s a different issue for the board to resolve. You can’t do their job, and you shouldn’t try. It is one of the really key adjustments
you have to make.”

“You’re not there to do the work of management. You can’t do their job, and you shouldn’t try."

The learnings never stop, says Rob. Now, as Chair of Contact Energy, a key learning he says is to see the role as the bridge between management and the board.

“I think the Chair should always talk last, because if they talk first that influences other directors. This is an important attribute to generate good debate. You have to be conscious as Chair not to jump in and express your view too early, and potentially stifle the ending of a debate.

“I think the Chair should always talk last, because if they talk first that can influence directors.”

“Ultimately, boards need to make decisions and get the work done, and ultimately you want to see consensus. Even if people don’t always agree, they are generally accepting if they feel their position has been heard even if it is not accepted by the majority, at which point it’s time to move on, and take collective responsibility.”

CONTRIBUTING WISELY

When it comes to company responsibility, a topic that is at the forefront of company minds – and particularly in the energy generation sector – is sustainability. Rob is careful to point out that Contact Energy has many renewable assets that the company inherited in its formation, so the danger to avoid is being ‘too high and mighty’ on the topic.

“The question you have to ask,” he says, “is what have you done since the company inherited the assets. Many of the generators have done really good things. In the case of Contact, its been quite material in the last ten years in reducing our carbon footprint. We closed Otahuhu and built Te Mihi, and we’ve now started our drilling programme for another tranche of
geothermal production. We’ll make a final decision on that next year.”

Contact Energy has certainly put its money where its mouth is, in this area. In recent times the company has invested around $1.7 billion in building a flexible, reliable and renewable generation portfolio which is now more than 80% renewable. It has reduced its greenhouse gas emissions by 51% since 2012, and has set a new target to further reduce emissions from
generation by 30% by 2030.

“We’re doing a number of things that will contribute to New Zealand being a low carbon economy, and we take great pride in that,” he says.

“The things that we intend in the future are the right things to do, and very much part of the de-carbonisation of the New Zealand economy. As long as electricity grows through sustainable – geothermal, wind – generation, it is going to be able to contribute to the growth of electric cars and the
decarbonisation of industry.”

“The things that we intend in the future are the right things to do, and very much part of the de-carbonisation of the New Zealand economy.”

LOOKING AHEAD

When looking at what he considers to be the big issues and challenges for New Zealand Inc. and governance, Rob turns to the topic of governance clutter, particularly relevant since research has revealed that insurance premiums for directors and officers’ insurance typically taken out by companies on behalf of board members have more than doubled in the past year for some organisations.

“Directors are avalanched with things like conduct and culture reviews, new privacy regulations and increased health and safety regulations than in the past. It can be quite distracting if they become the centre point of board discussions, away from what the core role is. All are important but can be dealt with through the right frameworks and processes.

“Coming out of executive life, I found it strange how people now talk about reputation being really important, but when was reputation not important, when was it not important for people to come home at night in the same state they left for work in the morning, when was it ever fair not to pay a man and a woman the same for the same job?

“We cannot lose sight of our real purpose. The most important thing boards do is ensure their companies grow, and generate long-term sustainability.”

“We could run the risk of getting a little overwhelmed by it, but we cannot lose sight of our real purpose. The most important thing boards do is ensure their companies grow, and generate long-term sustainability. All the other things contribute to it.

“Ultimately, it is the strategies that the company employs and how the risks associated with those strategies are managed that becomes the most important things the board should be focused on. And we can only do this if we seize the opportunities in front of us.”

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